Few companies can boast quadrupling an entire country’s exports of a single product line.
From January to April this year, the U.S. company’s plant in Heredia, northwest of San José, was the primary cause of the 400 percent growth in medical implant exports (over $80 million) for the first quarter of 2008.
“The increase in exports can be attributed to medical device volume increase and transfer pricing,” wrote Alexander Unfried, general manager of Allergan Costa Rica, in an e-mail to The Tico Times.
Inter-company transfer prices are the selling prices between the manufacturing site in Costa Rica and the related purchase site outside of the country.
Allergan is one of 23 foreign medical device companies – mostly from the United States – that operate in Costa Rica. The $800 million industry employs roughly 6,500 Costa Ricans to manufacture everything from catheters to syringes, according to Gabriela Llobet, executive director of the Costa Rican Investment Promotion Agency (CINDE).
The medical device industry alone grew three times more than any other in the first quarter, Llobet said.
Allergan first arrived in Costa Rica after buying out the German firm Inamed in 2006. It later opened a new manufacturing facility in March 2007, with operations starting in September.
Although the breast implants, which are made of silicone, are a major item produced by the company, Allergan also makes tissue expanders and Lap-Bands, used to help lose weight.
Costa Rica was second only to Ireland in total exports of medical implants to the United States so far this year, according to a press release from the Foreign Trade Ministry.
Costa Rica’s first quarter total exports rose by 10.5% over the same period last year, although fell by 1% to the U.S.
Some have speculated that the rise in exports from Allergan in Costa Rica was due to the closing of an Allergan plant in Ireland, but that it not the case, company officials said.
“The increase in medical device exports from Costa Rica, specifically breast implants, is not related to the closure of the Arklow (Ireland) facility,”Unfried said. “The volume transition will take place during the next 18 months.”
Despite an ailing U.S. economy, breast implant sales for cancer and cosmetic surgery patients have not seen a hit.
“Those products keep selling,” said Emmanuel Hess, the general manager of the Foreign Trade Promotion Office (PROCOMER).
Analysts said Costa Rica is an attractive location for such companies because of its relatively stable economic and political environment, qualified workforce, strategic location as a “near shore” site and tax incentives.
The companies operate in free-trade zones, enjoying eight years of 100 percent tax exemption on corporate income tax and a 0 percent tax on the repatriation of goods.
“We have an attractive and competitive tax incentive,” Llobet said. “It is another element that these companies take into consideration and evaluate in order to establish such a business … outside of their headquarters.”
Even though Costa Rica’s labor force is comparatively more expensive, it wins out in productivity, Hess said.
“That makes us more competitive at the world level,” he added.
Baxter Healthcare was the first U.S. medical device manufacturing company to land here 20 years ago. Its Cartago-based plant pumps out 170 different products, most of them for export.
Since Baxter’s arrival, other U.S. companies have joined the fold, among them Allergan, Hospira, Boston Scientific, Arthrocare and Coloplast.